Gold hits 2018 low as trade comments lift stocks, dollar

NEW YORK/LONDON (Reuters) - Gold on Monday marked a new low for the year to date after U.S. Treasury Secretary Steven Mnuchin’s declaration that a trade war between China and the United States was “on hold” helped boost appetite for higher-risk assets, such as stocks.

Gold jewellery is seen displayed for sale at a shop in a gold market in Basra, southeast of Baghdad February 14, 2015. Picture taken February 14, 2015. REUTERS/ Essam Al-Sudani/Files

Buoyancy in U.S. Treasury yields also weighed on appetite for non-interest-bearing assets, like bullion, analysts said.

Spot gold fell to its lowest since late December at $1,281.76 an ounce, and was down 0.03 percent at $1,291.1 per ounce by 1:34 p.m. EDT (1734 GMT). U.S. gold futures for June delivery settled down 40 cents, or 0.03 percent, at $1,290.90 per ounce.

“The dollar’s riding high and the 10-year (Treasury note’s) yield has broken above 3.05 percent for the first time since 2011,” said Mitsubishi analyst Jonathan Butler.

A stronger dollar makes assets priced in the U.S. greenback more expensive for holders of other currencies, while a bounce in yields had added to pressure on gold.

“With the China trade news, international investors sold off gold,” said Michael Matousek, head trader at U.S. Global Investors.

The world’s two largest economies stepped back from the brink of a global trade war and agreed to hold further talks aimed at boosting U.S. exports to China.

Gold prices last week fell below the psychologically-important level of $1,300 an ounce, and posted the first weekly close below the 200-day moving average since late December.

The yellow metal is also being weighed down by expectations that the Federal Reserve will lift U.S. interest rates again next month. Higher interest rates make non-yielding assets like gold less attractive to investors.

Naeem Aslam, chief market analyst at Think Markets, said investors were now looking ahead to this week’s meeting of the Federal Open Market Committee, which sets rates.

“If the Fed doesn’t tame its hawkish stance, we would expect more weakness in the gold price,” he said.

Mitsubishi’s Butler said gold could benefit from safe-haven buying in the long run if that exuberance loses steam and inflation pressures mount. But he added: “It’s possible that we might see a further correction in the very short term. That will of course depend on the newsflow, and whether the dollar can hold on to its gains.”

Meanwhile, platinum gained 1.9 percent at $899.50 an ounce, after also marking a fresh low for the year in earlier trade at $873.50.

Silver was up 0.4 percent at $16.49 an ounce, while palladium, the most industrial of the major precious metals, jumped 2.9 percent to $990.72.